Spain Residential Real Estate Market Analysis 2023

Spain’s residential property market remains buoyant, with nationwide house prices rising by 5.03% during 2022 (but falling slightly by 0.64% in real terms), according to figures from the online property information site Idealista.

This is in line with official figures released by the Bank of Spain, which showed that Spanish house prices increased by 4.72% to €1,740 per square meter (sq. m) during the year to Q3 2022, following y-o-y increases of 5.55% in Q2 2022, 6.68% in Q1 2022, 4.43% in Q4 2021 and 2.59% in Q3 2021. However, when adjusted for inflation, house prices actually dropped 4.85%.

Spain’s house price annual change

On a quarterly basis, house prices were almost unchanged in Q3 2022 (fell slightly by 1.21% when adjusted for inflation).

The nationwide Instituto Nacional de Estadistica (INE) house price index is even more optimistic, revealing a y-o-y increase of 7.6% (-2.2% inflation-adjusted) in Q3 2022.

By property type:

  • Existing dwellings: prices rose by 7.8% y-o-y in Q3 2022 (-2% inflation-adjusted), following a 4.3% increase in Q3 2021.
  • New dwellings: prices rose by 6.8% in Q3 2022 from a year earlier (-3% inflation-adjusted), after rising by 4.1% in the previous year.

By autonomous regions, Cantabria saw the biggest y-o-y price growth in Q3 2022, at 9.3%, closely followed by Andalucia (8.3%), Balears (8.3%), Canarias (8.1%), Cataluña (8.1%), La Rioja (8.1%), Ceuta (7.9%), País Vasco (7.8%), Madrid (7.6%) and Murcia (7.1%).

Spain house price index region

More moderate house price increases were seen in Valencian Community (6.9%), Navarra (6.8%), Castilla y León (6.6%), Castilla – La Mancha (6.6%), Extremadura (6.5%), Asturias (6.4%), Aragón (6.2%), and Galicia (6.1%).

Spain’s housing market only returned to growth in 2015, having fallen by 36.3% (-42.9% inflation-adjusted) from Q3 2007 to Q1 2015, with existing home prices falling by as much as 43.1% (-49% inflation-adjusted), based on figures from INE. There were 24 consecutive quarters of y-o-y declines.

From 2015 to 2019, house prices increased by an annual average of 2.5% (1.6% inflation-adjusted). After a slight house price fall of 1.85% (-1.13% inflation-adjusted) in 2020 due to the adverse impact of the Covid-19 pandemic, the Spanish housing market bounced back quickly in the following years, with prices rising by 4.43% in 2021 and 5.03% in 2022. Yet in real terms, house prices are actually down, amidst soaring inflation.


Year Nominal Inflation-adjusted
2008 -3.21 -5.53
2009 -6.25 -6.39
2010 -3.53 -5.93
2011 -6.78 -9.27
2012 -10.02 -12.72
2013 -4.20 -4.32
2014 -0.26 0.25
2015 1.85 2.17
2016 1.47 0.49
2017 3.09 1.62
2018 3.86 2.11
2019 2.10 1.65
2020 -1.85 -1.13
2021 4.43 -1.31
2022 5.03 -0.64
Sources: Bank of Spain, Idealista, Global Property Guide

Property demand remains robust. During 2022, home sales in Spain increased by 14.7% y-o-y to 649,494 units, according to Instituto Nacional de Estadistica (INE), following an annual increase of 34.8% in 2021 and a y-o-y decline of 16.9% in 2020 and 2.4% in 2019.

Yet residential construction indicators showed mixed results. In the first three quarters of 2022, the total number of housing starts fell by 20.5% y-o-y to 58,650 units while completions rose by 12.3% y-o-y to 70,304 units, based on figures from the Ministry of Development.

Overall, the Spanish economy expanded by a robust 5.5% in 2022 from a year earlier, following a 5.1% growth in 2021 and a huge 10.8% contraction in 2020, primarily buoyed by a strong rebound in tourism and healthy private consumption, according to the European Commission. Though the economy is projected to slow considerably this year, with a real GDP growth forecast of just 1.3%, based on figures from the Bank of Spain.

Spanish real house prices are still 36% below peak!

From 1996 to 2007, Spain’s national average house price rose by 197% (117% inflation-adjusted), one of Europe’s highest house price increases. The price of coastal properties surged 250% (155% inflation-adjusted) from 1996 to 2007, as hundreds of thousands of foreigners, mainly from the UK, France, and Germany, bought the property.

Spain house price index type

In Madrid and Barcelona, house prices rose 188% (109% inflation-adjusted) from 1996 to 2007, while prices in other inner provinces rose by 175% (101% inflation-adjusted).

Suddenly, in 2008, a housing slump battered the Spanish economy and brought spiraling unemployment. Developers were left with blocks of unsold properties and massive debts. Despite the price rises in recent years, nationwide house prices are still about 17% (-36% inflation-adjusted) below peak levels.

Land price variations

The average price of urban land transactions in Spain stood at €150.2 per sq. m in Q3 2022, down by 7.7% from the previous quarter but still up by 2.9% from a year earlier, according to the Ministry of Development.

Spain urban land prices

Thirteen of the 17 autonomous communities where figures are available saw land price increases during the year to Q3 2022. Though, land price movements vary considerably:

  • In Madrid, average urban land prices plunged by 22.4% to €228.5 per sq. m, in contrast to a 1.9% y-o-y increase in Q3 2021.
  • In Andalucia, land prices rose by a modest 2.1% to an average of €166.5 per sq. m, a sharp slowdown from a y-o-y growth of 12.5% in the prior year.
  • In Cataluña, the country’s second-largest region, land prices fell by 3.3% y-o-y to €153.1 per sq. m, following a 4.4% decline in Q3 2021.
  • In Castile-La Mancha, the average land price rose strongly by 16.2% to €99.3 per sq. m, an acceleration from a modest y-o-y rise of 4.4% in the previous year.
  • In Galicia, land prices increased 7.3% y-o-y to an average of €89.9 per sq. m in Q3 2022, following a 1.8% fall in the prior year.
  • In Castilla y Leon, the average land price increased strongly by 14.3% to €69.9 per sq. m, following a y-o-y growth of 15.2% a year earlier.
  • In the Canary Islands, the average land price surged 26.7% to €216.4 per sq. m, in contrast to a 15.1% decline in the prior year.
  • In Valencian Community, the average land price rose by 15.5% to €176.2 per sq. m, an improvement from a y-o-y fall of 5.3% in Q3 2021.

Demand showed mixed results. During the first three quarters of 2022, the number of land transactions fell by 6.7% y-o-y to 20,641 units, in stark contrast to a whopping 133% increase in the same period of 2021, according to the Ministry of Development. On the other hand, the value of land transactions rose by 13.9% y-o-y to €3.54 billion over the same period.

Property transactions are rising

Demand is rising strongly. During 2022, home sales in Spain increased by 14.7% to 649,494 units as compared to a year earlier, according to Instituto Nacional de Estadistica (INE), following an annual increase of 34.8% in 2021 and y-o-y declines of 16.9% in 2020 and 2.4% in 2019.

By property type:

  • Existing dwellings: 532,459 units sold in 2022, up strongly by 17.7% from the previous year.
  • New dwellings: 117,035 units sold, up slightly by 2.6% from a year ago.

Seventeen of Spain’s 19 autonomous communities and provinces saw a surge in demand. During 2022, Ceuta recorded the biggest increase in sales at 65.9%, followed by Canarias (31.6%), Balears (25.6%), Valencian Community (23.9%), and Asturias (20.6%). Strong increases were also seen in Castilla – La Mancha (18%), Andalucia (15.2%), Cataluña (14.5%), Aragón (13.5%), La Rioja (13.5%), Extremadura (13.1%), Murcia (13.1%), Castilla y León (12.2%), Cantabria (12%), País Vasco (9.8%) and Galicia (8.6%).

Spain residential transactions

In Madrid, which accounted for 61% of total sales last year, home sales increased by a modest 2.7% as compared to a year ago.

Only Melilla and Navarra registered a decline in home sales last year, of 6.4% and 0.5%, respectively.

The Spanish Golden Visa

Before the Covid-19 pandemic, foreign homebuyers accounted for about 12% to 20% of all home sales in Spain annually, sharply up from just a 4.24% share in 2009. In 2018, foreign homebuyers bought over 65,500 homes in Spain, up 7.4% from a year earlier, following annual growth of 13.7% in 2017. The Balearic Islands are especially attractive to foreigners with about one-third of total demand coming from foreigners, mainly due to its white-sand beaches and sunny Mediterranean landscape. It is followed by the Canary Islands, Valencian Community, Murcia, and Andalucia.

The Golden Visa scheme, applicable since 30th September 2013, has increased interest not only from the Middle East but also Asia and Russia. Any non-EU national bringing more than €500,000 to invest is automatically granted a Spanish residency permit.

In 2019, Spain approved 1,422 Golden Visas to main applicants, up by almost 20% from a year earlier. Of which, 681 Golden Visas were granted to foreigners via the real estate option – up 13.7% from the previous year and the highest figure ever recorded.

However, foreign homebuying slowed recently due to the Covid-19 pandemic. Golden Visas granted to foreigners were just 162 in H2 2020 and 232 in H1 2021 – two of the lowest ever seen since the program was launched. Interest from foreigners started to increase again in the second half of 2022, as the overall situation normalizes. In H2 2021, Spain granted 833 Golden Visas to main applicants, up from 574 in H2 2019.

Overall, the country granted a total of 7,425 Golden Visas to main applicants from 2014 to 2021, with Chinese and Russians accounting for 32% and 25% shares, respectively.

While no official figures are released yet for 2022, interest in foreign residency in Spain through property investment is rising again. According to Tranio’s research, the Spanish Golden Visa scheme remains among the top European investors’ choices last year.

Foreigners have a right to buy and resell all kinds of property in Spain - residential, commercial, or land, with no limits.

However, in February 2023, center-left political party Más País proposed a bill to scrap or drastically amend the country’s Golden Visa program, arguing that it pushes house prices and is detrimental to the economy.

Construction activity mixed

In the first three quarters of 2022, the number of housing starts fell by 20.5% y-o-y to 58,650 units, in contrast to a nearly 30% growth in the same period in 2021, based on figures from the Ministry of Development. In contrast, housing completions rose by 12.3% y-o-y to 70,304 units, following a 14% increase in the previous year.

Spain residential construction

Housing starts fell to an annual average of just 64,000 units in 2009-2021, from an annual average of 445,000 units in 1995-2008. Similarly, completions also dropped to an average of 64,000 units annually in 2011-2021, from 419,000 units in 1997-2010.

Currently, Spain’s total housing stock totaled nearly 26 million units, up slightly by 0.4% from a year earlier. Andalucia accounted for the biggest share of 17.2%, followed by Cataluña (15.3%), Valencian Community (12.4%), and Madrid (11.7%).

Gross rental yields have returned to normal

Gross rental yields on property in Spain have returned to normal, according to Global Property Guide’s research conducted in November 2022. In Madrid, yields range from 2.99% to 6.91% with an average of 4.96%. Similar yields, or maybe slightly higher, can also be had in Barcelona with the yields ranging from 3.33% to 10.03% and a city average of 5.99%. Not great, though not untypical for cities like Madrid and Barcelona. Yields on the very smallest apartments now offer reasonable returns. But then smaller apartments tend to need more maintenance, so a higher yield is justified.

In other cities the rental yields are also moderate to good. Valencia’s rental yields range between 2.77% and 8.16%. Córdoba produces yields between 4.00% to 7.32%. In Alicante, you can expect rental yields between 4.57% to 6.79%. Seville has rental yields of 3.08% to 9.47%. Palma de Mallorca earns yields between 3.85% to 6.96%, and Murcia produces rental yields between 3.16% and 8.67%.

Cap on rent increases extended

Recently, the Spanish government announced that the cap on the amount landlords can increase the rent of their tenants is extended throughout 2023. The rent increase cap of a maximum of 2% was first introduced in March 2022 to help protect the 30% of people who rent properties in Spain, shielding them from the adverse impact of surging inflation.

“The rental market has become tense due to the shortage of supply, causing the main Spanish cities and provincial capitals to reach record prices,” said Maria Matos, director of research and spokesperson for Fotocasa. Based on Fotocasa’s projections, rents could rise by 5% or more by 2023. 

Government figures showed that about 3.5 million rental agreements are presently subject to potential rent increases.

Prior to the rent increase cap, many landlords could by law, increase rents on a yearly basis based on the Consumer Price Index (CPI), a measure that represents inflation. For instance, if the rental agreement was due to be renewed and the inflation rate for the year was 10%, then the landlord could raise the rent by a maximum of 10%.

New mortgage loans increasing, but the size of the mortgage market still contracting

During 2022, the total amount of new home mortgages increased sharply by 19.7% y-o-y to €63.13 billion, according to INE. Likewise, the total number of new mortgage loans rose by 12.6% last year to 433,539 compared to a year earlier. Despite the improvement, it remains far below the annual average of 1.13 million new home mortgages granted from 2003 to 2008.

Spain housing loans outstanding

The total value of mortgage loans outstanding fell slightly by 0.2% to €512.26 billion in 2022, following a slight increase of 1.2% in 2021 and an annual average decline of nearly 3% from 2012 to 2020.

The size of the mortgage market as a percent of GDP stood at about 39% in 2022, down from 42.6% in 2021 and 45.2% in 2020, based on estimates from the Global Property Guide. This is also far from the annual average of 60% of GDP from 2007 to 2014.

Spanish interest rates are now rising

In December 2022, the average mortgage interest rate in Spain was 2.13%, sharply up from 1.1% a year earlier and 1.17% two years ago, according to the European Central Bank (ECB). Over the same period:

Spain interest rates

  • The interest rate for housing loans with initial rate fixation (IRF) of up to 1 year stood at 2.69%, up from 1.28% in December 2021.
  • The interest rate for housing loans with IRF between 1 and 5 years was 5.06%, up from 4.6% in the previous year.
  • The interest rate for loans with IRF of over 5 years was 2.13%, higher than the 1.09% a year earlier.

Spain’s housing market has traditionally been extremely vulnerable to interest rate changes, given that before 2004 more than 80% of new mortgages had initial rate fixations (IRF) of less than 1 year, a proportion which rose to 90% from 2005 to 2006.

Spain mortgage by interest rate

However, there has been a continuous decline in the share of adjustable-rate mortgages in recent years. In November 2022, fixed-rate mortgages represented 65.4% of all new loans contracted, up from 42.8% share three years ago and from less than 5% a decade ago, according to INE.

Foreclosures falling

Foreclosures fell sharply by 17% to 12,692 dwellings during the first three quarters of 2022, following an annual increase of 9.4% in 2021, based on figures from INE.

By dwelling type:

  • Existing dwellings: 11,127 units in Q1-Q3 2022, sharply down by 17.3% a year earlier
  • New dwellings: 1,565 units, down 15% from the previous year

Of the autonomous regions and cities, Ceuta registered the biggest y-o-y decline in foreclosures of 57.1% in the first three quarters of 2022, followed by Canarias (-38.3%), Castilla – La Mancha (-34.2%), La Rioja (-31.5%), Valencian Community (-25.3%), Murcia (-23%), Cataluña (-17.7%), and Madrid (-15.4%). More modest decreases were seen in Cantabria (-9.7%), Castilla y León (-8%), Andalucia (-6.9%), País Vasco (-6.1%), Navarra (-4.7%), and Asturias (-1%).

Spain foreclosures

In contrast, foreclosures increased in Aragón (2.5%), Extremadura (26%), Balears (42.1%), and Melilla (100%).

Cataluña, Andalucia, and Valencian Communities accounted for about 64% of all foreclosures during the first three quarters of 2022.

Strong economic growth in 2022, but the outlook is uncertain

On January 23, 2014, Spain was the second euro zone country to exit its international bailout program, after Ireland. The Spanish economy has consistently outperformed much of Europe since. However, it has been a long, hard slog. Recession had been Spain’s normal condition for years, due to the global financial meltdown and the Eurozone debt crisis.

Spain gdp inflation

The Spanish economy grew by an annual average of 2.8% from 2015 to 2019. Then the Covid-19 pandemic broke out, causing consumer demand and business investment to plunge. The economy contracted by a huge 10.8% in 2020 – one of the hardest hit in the region and the country’s worst performance in recent history. Spain recorded a real GDP growth rate of 5.1% in 2021, but still not enough to fully offset the decline in the preceding year.

Then in 2022, the economy expanded by a robust 5.5% from a year earlier, primarily buoyed by a strong rebound in tourism and healthy private consumption, according to the European Commission.

“Spain weathered relatively well the negative shocks unleashed by Russia’s war of aggression against Ukraine in 2022,” said the European Commission. “The resilience of the economy was underpinned by the strong rebound in tourism over the summer season and dynamism of private consumption, also supported by positive labor market developments.”

Spain’s economy is projected to slow considerably this year, with a real GDP growth forecast of just 1.3%, based on figures from the Bank of Spain, as consumption will remain subdued due to rising interest rates and as inflationary pressures will further erode purchasing power in 2023.

In January 2023, nationwide inflation stood at 5.9%, up from 5.7% in the previous month but still lower than the previous year’s 6.1%, according to INE. Inflation reached a nearly four-decade peak of 10.8% in July 2022. These figures are far from an average of just 1.1% from 2010 to 2020 and well above the ECB’s target of 2%.

Spain’s budget deficit was estimated at 4.3% of GDP in 2022, according to the Bank of Spain, sharply down from shortfalls of 6.9% in 2021 and 10.3% in 2020. However, it remains above the pre-pandemic deficit of 3.1% of GDP recorded in 2019. The government aims to reduce the deficit to about 3.9% of GDP in 2023.

Spain unemployment

The country’s gross public debt also declined by more than 5 percentage points in 2022 to 113.1% of GDP, its steepest decline ever, after it gained more than 20 percentage points during the pandemic, according to the Bank of Spain.

The nationwide unemployment was 12.87% in Q4 2022, up from 12.67% in the previous quarter but still down from 13.33% in the previous year, according to INE. Unemployment in Spain averaged about 22% from 2010 to 2017 before falling to an annual average of 14.5% in 2018-22.